Getting Risk Governance Right
13 Pages Posted: 26 Nov 2017
Date Written: March 21, 2013
This paper sets out the criteria that boards and supervisors should use to determine whether banks are governing risk correctly. First, boards have to set an overall risk target consistent with the overall return target. Second, the bank’s business model has to set a risk capacity and risk appetite that can enable the bank to meet its target for risk and return. Finally, the bank has to ensure that its three lines of defense (management, risk management and compliance, and internal audit) function well, both singly and in combination.
JEL Classification: G21, G28, G30, G32, G38
Suggested Citation: Suggested Citation